The latest edition of the SME Sentiment Tracker by market research firm ACA Research in partnership with Ovation has painted a positive financial situation for Australia’s SME sector.
The report found that Australian SMEs experienced a significant improvement in financial performance in April 2023, following a slow start to the year, with 28 per cent of SMEs generating more revenue than pre-pandemic levels, the highest percentage since the study began in April 2020.
In addition, the report found that 59 per cent of SMEs recorded a profit in March. As a result, the proportion of businesses expecting growth over the next 12 months rose to 36 per cent, up from 30 per cent a month earlier.
Despite the positive developments, there remains growing concerns about staff shortages and associated wage costs. Recruitment activity dropped in the sector, which the report stated is a reflection of the uncertain economic environment, and only 21 per cent of SMEs were actively recruiting, down from 26 per cent in the previous month. Recruitment difficulties have also rebounded after trending lower since January, with 71 per cent of those experiencing difficulties reporting a lack of skilled candidates and 53 per cent facing rising wage demands.
On top of recruitment concerns, more than 80 per cent of SMEs remain most concerned about rising interest rates and energy costs. Because of these concerns, 69 per cent are passing on higher input costs to customers, which the report attributed to businesses finding it increasingly challenging to maintain their profitability.
Sentiment towards the domestic economy improved in April as interest rate hikes were paused, the report noted. However, sentiment towards global economic conditions remains low as inflation and geopolitical tensions continue.
“It is very positive to report a stronger financial performance from SMEs in April despite the ongoing cost challenges,” ACA Research Managing Director James Organ said. “Clearly many businesses are doing more with less as recruitment activity is put on hold while the cat and mouse game continues with interest rates and the impact this has on consumer spending.”
